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Monetary policy predictability in the Euro area: an international comparison

[journal article]

Zaghini, Andrea; Wilhelmsen, Bjørn-Roger

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Abstract We evaluate the ability of market participants to anticipate monetary policy decisions in 14 countries. First, by looking at both magnitude and volatility of changes in the money market rates we show that the days of policy meetings are special days for financial markets. Second, we find that the predictability of FED, Bank of England and ECB is fully comparable. Finally, an econometric analysis of the ability of market participants to incorporate in the current short-term interest rates the expected policy changes shows that in the Euro area (and in other countries) policy decisions are anticipated well in advance.
Classification Political Economy; Economic Policy
Free Keywords Monetary policy; Predictability; Money market rates
Document language English
Publication Year 2010
Page/Pages 25 p.
Journal Applied Economics (2010)
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)